Cloudflare, Inc. Q1 2026 Earnings Recap

Shares declined 21.2% as investors reacted negatively to an apparent deceleration in dollar-based net retention and cautious signals around margin trends, overshadowing solid revenue growth and customer expansion.

Key Takeaways

• Revenue rose 34% year-over-year to $639.8 million, driven by growth in large customers contributing 72% of total revenue.
• Dollar-based net retention slipped 2% sequentially to 118%, indicating some weakening in customer spending momentum despite a 7% year-over-year increase.
• Gross profit margin was 72.8%, with operating margin at 11.4%, suggesting potential margin pressures relative to prior periods.
• The company added a record number of $5 million-plus customers in the quarter, signaling continued strength in landing large deals.
• Free cash flow was $84.1 million, described as strong but apparently insufficient to offset concerns from slower net retention and cautious outlook cues.